Company pension plans have traditionally been one of the most important voluntary social benefits at Siemens. More than a decade before Chancellor Otto von Bismarck introduced a state pension and disability insurance system in Germany in 1889, the company set up a Pension, Widows’ and Orphans’ Fund on the occasion of its 25th anniversary. In establishing the new provident plan, Werner von Siemens had two goals in mind: improving his employees’ social conditions, and keeping skilled workers loyal to the electrical equipment company for the long term. Thus Siemens became one of the 19th century’s pioneers in employee benefits.
Voluntary employee benefits at Siemens – founding a tradition
Company pension plans have traditionally been among the most important voluntary benefits that Siemens provides. Only a few years after the Siemens & Halske Telegraph Construction Company was founded, Werner von Siemens insured the entire staff with the Health, Death and Invalids’ Fund for Mechanical Construction Workers, founded in Berlin in 1853. In the late 1860s, Siemens brothers Werner, William and Carl became more and more interested in setting up their own company pension plan for the staff, which had now grown to nearly 1000 employees. The triggering event arrived with the expiration of the Russian “remonte” contracts in 1867 – the maintenance agreements for the Russian state telegraph network, which had been a mainstay for twelve years. During that time the brothers had invested substantial amounts of money in a reserve fund that was now freed up. They decided to use it for the staff’s benefit.
Werner von Siemens first suggested to his younger brother Carl that some of the money should be passed along to the executives – called “officials” – in St. Petersburg. It was their dedication that had made the success of the Russian telegraph business possible in the first place. Instead, Carl von Siemens suggested transferring the money to Berlin as an “invalids’ fund,” and using its interest to assist employees. That suggestion was adopted, and in 1869 the company set up two such funds: a “workers’ support fund” and an “officials’ support fund.”
Financial security for the staff – permanent employee support begins
For the company’s 25-year anniversary in 1872, both of these funds were then rolled over into a permanent “Workers’ and Officials’ Pension, Widows’ and Orphans’ Fund” for employees in Berlin, London and St. Petersburg. In addition to the 50,000 thalers provided by the three Siemens brothers, Werner von Siemens’ former partner Johann Georg Halske contributed an additional 10,000 thalers. So the fund came into the world with total assets of 60,000 thalers. That same year, Siemens Brothers London left the joint fund and established its own Pension Fund. Later, in 1888, the Russian branch also established a fund of its own. With this decision, the company is far ahead of its time: the Pension, Widows’ and Orphans’ Fund was founded more than a decade before the German Parliament established a statutory disability and pension insurance system.
“It’s not human concern alone” – Werner von Siemens aims for staff loyalty
The fund supported the Siemens brothers’ goals in terms of not just social justice, but also personnel policy. The benefits would help resolve or alleviate the tensions generated by social inequities. But also, because of the acute shortage of skilled workers and high turnover, another aim was to build up a core team and keep skilled staff loyal to the expanding electrical company for the long haul. Not to mention that corporate management hoped to immunize the staff against “the socialists’ subversive theories” and make them less willing to strike. In other words – as Werner von Siemens said in retrospect – it wasn't “just human concern, but essentially healthy egotism” that motivated him and his brothers William and Carl to found the pension fund.
The charter, drafted with the assistance of a workers’ committee, laid out detailed benefits to be provided by the company, together with the rights of the entitled staff. Employees were categorized in three groups: “officials,” “other employees” and workers, and “female workers.” In addition to the interest from the principal, which was invested with the company at five percent, every year Siemens & Halske paid a defined amount into the fund for each employee, which varied for each group. The “officials” and workers themselves made no contributions.
Loyalty earns employees benefits – and benefits inspire loyalty
After 30 years of service with Siemens & Halske, any employee over the age of 50 was entitled to a pension. If disabled in an occupational accident, employees were entitled to financial support after ten years with the company. The amount of the monthly payments – to which the beneficiaries had no legal entitlement, however – was based on the number of years of service. The maximum was just under two-thirds of the employee’s pay. Survivors would be assisted depending on “disposable cash,” and only if they were in need. Employees who went to another company, or who became disabled through their own fault, or who acted contrary to the company’s interest, forfeited any claim to a pension.
In his memoirs, Werner von Siemens said he felt the idea had turned out well on the whole: “Officials and employees felt they were permanent parts of the company and identified its interests with their own.” The pension fund significantly increased loyalty to the company – especially because, in contrast to the state pension and disability insurance system that became mandatory in 1889, it required no contributions from the staff. The basic idea of the assistance fund founded in 1872 lives on in the Siemens Defined-Benefit Pension Plan (BSAV). This is still a social benefit that the company provides voluntarily and finances entirely out of its own capital.
You might also find this interestingFurther information on this topic
- Almuth Bartels, Monetarisierung und Individualisierung. Historische Analyse der betrieblichen Sozialpolitik bei Siemens (1945–1989), Stuttgart 2013 (available only in German)
- Jakub Kastl / Lyndon Moore, Wily welfare capitalist: Werner von Siemens and the pension plan; in: Cliometrica, October 2010, Volume 4, Issue 3, Seite 321–348
- Christoph Conrad, Erfolgsbeteiligung und Vermögensbildung der Arbeitnehmer bei Siemens (1847–1945), Stuttgart 1986. S. 98–119 (available only in German)